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Gold price will explode, says Pollitt
Allan Seccombe
Posted: Thu, 20 Apr 2006
[miningmx.com] -- THURSDAY’S pull back in the gold and silver prices is seen by Pollitt & Co president Murray Pollitt as just a hiccup in a steady march higher, but other market watchers warn the market is way too overheated and it could all come crashing down.
Gold pushed up to fresh 25-year highs on Thursday during Asian and European trading, with spot hitting $645.75 an ounce, but prices tumbled after the North American markets opened as investors took their profits. Gold fell to $618 late evening South African time.
Silver pulled back from its 23-year high of $14.68/oz on Thursday to just above $12.50, prompting some analysts to say the metal was in free fall after doubling in price recently.
There is skittishness in the market, with some investors afraid of being caught holding gold at price levels not seen in more than two decades if the market suddenly does
turn, but some say the rally isn’t quite over yet.
Pollitt, the president of Toronto-based Pollitt & Co who says he is long on gold, sees the pull back as a natural phenomenon, but for the overall trend for gold prices to be definitely stellar.
“There is going to be an explosive move up in all these things like gold and commodities, which will be a manifestation of the flight out of money,” he told Miningmx. “I think we are in the very early stages of a bull market.”
Arguing that currencies were increasingly being devalued and perceived by investors to be seen as worthless, he said capital flows would be seen into assets like precious metals, property and art.
There are other factors driving investors into the safe haven of gold as tensions ratchet up around Iran’s nuclear programme and the bellicose stances by the United States towards the Middle East country. Oil prices have broken through $70 a barrel prompting inflationary fears around
the world.
"The outlook for the exchange rate will not improve significantly going forward. If the Iran situation doesn't improve, then you should have further upward pressure on gold prices," Michael Widmer, an analyst at Macquarie Bank, is quoted by Reuters as saying.
However, John Clemmow from Investec Securities in London has a less bullish outlook for gold and commodity prices, drawing on the analogy of a famous cartoon character having done something foolish.
“We are in what I call a Wile E. Coyote moment, when he runs off the edge of the cliff and he looks down and can see the awful doom that awaits him, but he’s still hanging in mid-air,” Clemmow said.
“There’s a real crack coming,” he said. “Does it mean that prices won’t go higher in coming weeks? I don’t know. Does it mean sometime in the next 10 years they will be massively lower? Yes.”
Both market watchers declined to give a price forecast, but Pollitt said if gold
was to be in line with copper and oil, it should be up around $900 an ounce.
Bill Murphy, the chairman of the Gold Anti-Trust Action Committee, sees gold increasing nearly five-fold from current levels.
"Even though we are at $620 now, we expect gold to go to $3,000," Murphy said on the MoneyWeb Power Hour business radio show in South Africa, adding the correction wouldn't last long.
"It's expected. It's healthy and I think we'll be back up again in the near future," he said, citing the US deficits and high oil prices as factors for his view.
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